Contracts and agreements are often used interchangeably, but they are not the same thing. The key difference lies in their legal enforceability. All contracts are agreements, but not all agreements are contracts. This principle was highlighted in a recent case study involving a dispute between a business owner and a freelance writer.
The business owner, let`s call him John, had hired the freelance writer, let`s call her Sarah, to write a series of blog posts for his company`s website. They had agreed on the scope of work, payment, and deadlines via email. Sarah delivered the work on time, but John was not satisfied with the quality of the content. He refused to pay Sarah, claiming that their agreement was not a legally binding contract.
Sarah took the matter to court, arguing that their email exchange constituted a valid contract. The judge, however, sided with John and dismissed the case. The reason was that their agreement lacked certain elements required for a contract to be legally enforceable.
So, what are these elements that differentiate a contract from an agreement? Let`s break them down.
1. Offer and acceptance: For a contract to be formed, there must be an offer made by one party and accepted by the other. The terms of the offer and acceptance must be clear and unambiguous. In the case study, John`s email to Sarah could be considered an offer, but Sarah`s acceptance was not explicit.
2. Consideration: This refers to something of value that each party gives to the other as part of the agreement. In a contract, consideration must be present for the agreement to be legally binding. In the case study, John promised to pay Sarah for her work, but Sarah did not offer anything in return, so there was no consideration.
3. Intention to create legal relations: Both parties must intend for their agreement to be legally binding. If one party did not have this intention, then the agreement may not be enforceable. In the case study, it was unclear whether John and Sarah intended for their email exchange to create legal relations.
4. Capacity to contract: Both parties must have the legal capacity to enter into a contract. This means they must be of legal age, mental capacity, and not under duress or undue influence. In the case study, there was no issue with capacity.
Based on these elements, it is clear that John and Sarah`s email exchange did not meet the requirements for a legally binding contract. While they had agreed on the scope of work, payment, and deadline, their agreement lacked consideration and an explicit acceptance. Therefore, John was not obligated to pay Sarah for her work.
In conclusion, it is essential to understand the difference between agreements and contracts, especially when entering into business relationships. A clear and comprehensive contract protects both parties and ensures that the terms of their agreement are legally enforceable. As a professional, it is crucial to pay attention to the language used in contracts and agreements to ensure that they meet the required legal standards.